October 29, 2009

US hopes of record soy exports will be dashed by competition from huge South American harvests, Rabobank has warned in a report forecasting falls ahead for both soy and rapeseed prices.

Washington's forecast of soy exports of 1.31 billion bushels next year "appears overdone", the bank said, estimating the actual figure will fall short by nearly 100 million bushels.

The US Department of Agriculture (USDA) estimate underplays the prospect of a record crop in South America, where many farmers have been planting fast-maturing varieties to cash in on prices which remain well above historical levels.

The bank, proclaiming a "bearish view" on forward soy contracts, forecast prices successively falling to US$8.50 a bushel by next summer.

Despite the stronger price direction in the first half of October, Rabobank is forecasting the overall bearish trend in Chicago soy prices as likely to continue over the next 12 months.

The shortfall in imports would rebuild US stocks to 330 million bushels by the end of the 2009-10 year, next August, compared with a Washington prediction of 230 million bushels.

The rich supply of South American soy will also put an end to a rally in rapeseed prices fuelled by demand from Europe's feed industry.

Europe's feed companies are suffering a squeeze on soy imports, spurred by tight regulations on contamination with unlicensed genetically modified crops as well as a shortfall caused by poor South American harvests last time.

Based on the lack of supply in the soybeans market, Rabobank expects rapeseed prices to see some further upside over coming months.

However, the rest of the oilseed complex is expected to have a weaker outlook following the South American soy harvest.